Asian and European stocks have fallen on Monday as the global share sell-off entered its second week.
Japan's Nikkei index closed 3.4% lower - its biggest one-day fall in nine months - while Shanghai's composite index was 3.5% down. In London, the FTSE 100 was down 86 points, or 1.5%, at 6,031.3 by 0825 GMT, having earlier dipped below 6,000. Last week, a slump in Chinese stocks and fears of a slowdown saw the biggest share sell-off in more than four years. French and German markets also slipped in early trading - with the Cac and Dax indexes losing close to 2% each. In Taiwan shares closed down 3.7% while the main Indian market was 3.6% lower in mid-afternoon trading. The Nikkei tumbled 575.68 points to 16,642.25 on Monday, its lowest level since December and the largest single day plunge since June 2006. The fall was largely a result of the continued rise of the yen - which hit its highest rate against the dollar in three months on Monday. A strong currency cuts profits of Japanese firms when overseas earnings are brought home - resulting in investors selling shares in exporters such as Toyota Motor and Canon. By close of trading on Friday, indexes had tumbled across the US, Europe and Asia. The Dow Jones fell 4.2% during the week and the FTSE 100 lost £80 billion ($156 billion), or 5%, in value.
Investors had blamed factors as varied as a new tax in China and the US mortgage market for the decision to dump stocks. The size of last week's sell-off may have caught investors by surprise, but observers had been warning that a market correction was on the cards. Many of the world's top indexes and shares had climbed back to levels not seen since the dot.com bubble was burst in 2000, fanning fears that they had become overvalued. China's Shanghai market - which sparked the sell-off by falling almost 9% on Tuesday, its biggest decline for a decade - has more than doubled in value since the end of 2005. Volatility probably will continue as riskier assets are sold, analysts said. „Our short-term scenario is that the markets will continue to show weakness,” said James Chua of Phillip Capital Management. There have been an increasing number of signs that the US economy may have been slowing down more severely than was previously forecast. On Wednesday, the government said that the US economy grew at a rate of 2.2% in the last three months of 2006, down from a previous estimate of 3.5% and below analysts' forecasts. Former Federal Reserve chairman Alan Greenspan did little to calm markets when he said last week that there was a possibility that the US economy would go into recession by the end of the year. (BBC NEWS)